Apple Music Investigated for Label Collusion

Apple Inc. sign displayed at the Yerba Buena Center before the start of the the company's Spring Forward event on March 9, 2015 in San Francisco, California.

The attorneys general of New York and Connecticut have been investigating Apple's new streaming service in an attempt to determine whether the tech giant pressured or conspired with record labels to withdraw support for other services.

At issue: The advertising-based freemium model offered by Spotify and other companies which has prompted concern by the attorney general of New York, Eric T. Schneiderman, and the attorney general of Connecticut, George Jepsen, as to potential collusion whereby a competitor attempts to edge out another.

Apple Music does not provide a free version, but is offering a three-month free trial period.

A spokesman for Schneiderman told the New York Times the attorney general was looking into Apple's negotiations with record labels to preserve consumers' use of these new streaming services.

"It's important to ensure that the market continues to develop free from collusion and other anticompetitive practices," said the spokesman, Matt Mittenthal.

It was reported in April that the European Commission has also been looking into Apple's dealings with record labels. That news motivated the New York and Connecticut investigation, according to a source with knowledge of the situation.

In a letter to the to Schneiderman's office from Universal Music Group's legal firm, Hunton & Williams, that was the first written response to the antitrust inquiry, the label group states it has no agreements with Apple or other labels that might impede the availability of free or ad-supported services.

According to the letter, the attorneys general investigation is currently suspended. This does not mean the query is concluded, as the letter notes, and the attorneys general may take further action in the future.

"UMG shares the Attorneys General’s commitment to a robust and competitive market for music streaming services in the mutual best interest of consumers, artists, services and content companies alike – and we have a long track record to that effect," UMG told Billboard in a statement. "We are pleased to have provided the Attorneys General information demonstrating that conduct. It is our understanding that, given these representations, the Attorneys General have no present intention to make further inquiries of UMG in this regard."

Connecticut Attorney General Jespen told the New York Times that his office was satisfied with Universal's response, adding, "We will continue to monitor that market to ensure that consumers and competition are protected."

Speaking to Billboard on Monday, June 8, Apple SVP, Internet Software Services Eddy Cue wouldn't address the freemium debate directly but did say, "It's not, 'In order for us to win, everybody else has to lose.' We always looked at it as we want to make the best product on the planet -- we want people to hopefully feel that way -- but that doesn't mean it has to be the only product."

A source familiar with situation told Billboard Warner Music Group was not contacted about the investigation.